Warren Buffett looks for the following qualities in his managers: integrity, intelligence and energy. Without integrity, he feared an energetic intelligent manager will work to the disadvantage of the business owners.
Sunday, July 14, 2002 in the Statesman (Kolkata) East India's most important newspaper
Dishonesty, Greed and Hypocrisy in Corporate America
by Huck Gutman
This is a tale of greed. And dishonesty. And hypocrisy.
These are hard times for Wall Street, the American economy, and President George W. Bush. As the conservative and pro-business major publication Fortune reports, ongoing revelations of corporate wrongdoing and accounting scandals have "created a crisis of investor confidence the likes of which hasn't been seen since the Great Depression."
The current spate of bad news began with Enron, the largest corporate bankruptcy in American history. Enron executives, propelled by greed, were not satisfied with immense salaries: they set up all sorts of spin-off partnerships to enrich themselves at the expense of stockholders and the corporation's bottom line. In a little more than a decade Enron soared from obscurity to become the nation's seventh largest company, with over 20,000 employees in forty countries. But its dishonesty about profits, and its off-the-books energy deals, abetted by fiscal accounting that was erroneous, misleading, and downright dishonest, eventually caused an implosion of gigantic proportions.
On December 28, 2000, Enron stock sold at over $84 a share. Eleven months later, to the day, Enron shares plummeted to less than a dollar in the heaviest trading volume in a corporation ever recorded by a major stock exchange. The investors in the company - many of them Enron employees - rushed to get out of the stock before it became totally worthless. Two months later Enron stock was delisted by the New York Stock Exchange, and today its stock is just that, worthless. The federal Justice Department is in the midst of a criminal investigation of the energy-trading company, but the damage to shareholders and pensioners is done.
Enron was just the beginning, as example after example of corporate greed and accounting malfeasance has come to light. Every one of the corporations I shall discuss is - or was - among America's largest companies.
The regional telephone company Qwest provides basic telephone service to fourteen states, has revenues of over $18 billion a year and handles 240 million phone calls and 600 million e-mails each day. The fourth largest U.S. telephone company, it is under investigation for criminal corporate practices. The Securities and Exchange Commission (SEC) is currently examining its accounting procedures. These indications of likely fiscal impropriety have caused its stock to crash from its high of $67 two years ago to just under $2, a drop of 97 percent.
Tyco International is one of the world's largest conglomerates, operating in over 80 countries with revenues of $36 billion. In recent months, huge questions surfaced about the way in which the corporation accounted for the multiple acquisitions that transformed it from a small company into a corporate behemoth. Its CEO, Dennis Kozlowski, was forced to resign, and shortly afterwards was arraigned on charges of tax evasion. Tyco, which sold at $60 a share six months ago, in the wake of the financial irregularities in its booking of acquisitions, is now worth just over $10 a share.
Compared to Adelphia Communications Corp., one of America's largest cable television providers, Tyco has performed well on the stock market. Six months ago the respected journal Business Week reported Adelphia's value at between $9.5 billion and $11.8 billion. Since then, Adelphia has entered bankruptcy following disclosures that its finances were in disarray, in large measure because it had made $2.3 billion in off-balance sheet loans to partnerships run by family of John Rigas, the CEO of Adelphia. Its bankruptcy is the fifth largest such filing since 1980. Adelphia's shares sold for $42 dollars a year ago, but had dropped to $.70 a month and a half ago, when all trading in its shares was halted.
Global Crossing, which had a major role in the development of fiber optic cable networks, is under investigation by the SEC for fraudulent accounting. The corporation, it appears, arranged 'deals' in which no goods or services were exchanged, but which nonetheless made it appear that profit was being generated. These purely paper transactions inflated the company's revenue substantially. Global Crossing also filed for bankruptcy. Its share price was over $60 two and a half years ago. Each share is worth $.06 today, a drop of 99.9 percent.
American stock markets - and world markets - have been shaken by the demise of WorldCom. Its balance sheet lists assets of $103 billion, and net income for the calendar year ending March 31 of over $1 billion. Yet it has been revealed that fraudulent accounting hid $3.8 billion in losses, and it is rumored that additional losses may be forthcoming. What this huge telecommunications company did was record daily costs as capital expenditures, a dishonest procedure which allowed it to erase an enormous operating loss and record a sizeable but illusory profit. Three years ago WorldCom stock traded at $64. Today it trades at $.20, a drop of well over 99 percent. It has defaulted on $4.25 billion of its debts to this point, and future defaults are certainly possible.
There are likely more revelations of corporate malfeasance and dishonesty to come. For instance, others in the energy business along with Enron -- Dynegy, El Paso Corp., CMS Energy, Williams, and Halliburton - are currently under scrutiny for the manner in which they have made trades and accounted for revenues and expenses.
Halliburton is particularly interesting, since it points to corporate corruption on a different level. Not that its accounting irregularities are larger than those of WorldCom or Enron, for they are not. But the scandal at Halliburton has a great deal, a great deal, to do with the capacity of the current political administration in Washington to clean up that sewer of greed and dishonesty which, it so unhappily appears, is characteristic of many corporate boardrooms.
Halliburton is a major provider of engineering services, particularly to the energy sector. A current SEC investigation is investigating Halliburton's accounting practices on cost overruns on construction jobs. The former CEO of Halliburton, who was in charge when those accounting practices were introduced, is Dick Cheney, currently Vice President of the United States. A recently filed suit alleges that Mr. Cheney conspired, along with others at Halliburton, to file false financial statements and thereby mislead investors. The suit claims Halliburton's deceptive accounting procedures led to overstatements of revenue amounting to as much as $445 million in a three-year period during Mr. Cheney's tenure as CEO.
On July 25, 2000, the day after Mr. Bush selected Mr. Cheney as his Vice Presidential running mate, Halliburton stock sold at $42. Today it sells at $13.
Arthur Anderson LLP, formerly one of the "Big Five" international accounting firms, is today in disarray and probable dissolution. It was convicted of obstruction of justice for destroying Enron-related documents. It was also the accounting firm for WorldCom, Qwest, and Halliburton. In 1996 Mr. Cheney made a promotional videotape for Anderson. "One of the things I like that they do for us is that, in effect, I get good advice, if you will, from their people based upon how we're doing business and how we're operating, over and above," Mr. Cheney said, "just sort of the normal by-the-books audit arrangement."
Arthur Anderson was also the accountant for a small corporation named for Harken Energy. Therein lies a tale. Fifteen years ago, when George W. Bush was a businessman faced with fiscal failure, Harken Energy bought Spectrum 7, a small company of which Bush was then CEO. Since Spectrum 7 was unprofitable and saddled with debt, the deal brought Harken little gain but the CEO's connections to his father - who happened to be the President of the United States.
Later, although not before our tale is concluded, Harken itself would turn into a company with troubles of its own. But while it appeared healthy, Harken extended generous stock options to the son of President George H. W. Bush. Then the fancy accounting began. Paul Krugman has reported in the New York Times that it involved creating a dummy entity to serve as paper front to then purchase "some of the firm's assets at unrealistically high prices, creating a phantom profit that inflates the stock price, allowing the executives to cash in their stock."
Here is Krugman's description of what happened at Harken Energy, a description which has subsequently been reported all over the nation. "A group of insiders, using money borrowed from Harken itself, paid an exorbitant price for a Harken subsidiary, Aloha Petroleum. That created a $10 million phantom profit, which hid three-quarters of the company's losses in 1989."
Once Harken's stock price was inflated by means of this maneuver - significantly, Arthur Anderson was the accounting firm, and Mr. Bush was on Harken's audit committee - Mr. Bush was able to sell his shares at a large profit shortly before the price of Harken stock dropped substantially. To be specific, on June 22, 1990, Mr. Bush, a director of Harken, sold 212,140 shares for $4 a share, for a total of $848,000. Two months later, on August 20, Harken announced a loss of $23.2 million; on that day its share price dropped 20 percent to $2.375. It closed the year at $1 a share.
There's more to the story. As Wall Street tries to cope with a crisis of confidence involving the fiscal probity of corporations, President Bush has in the past several days recommended that corporations eliminate loans to top executives and corporate insiders. Yet back in the days when he was involved with Harken Energy, the corporation allowed him to borrow heavily from the company's coffers, and then erased his personal liability for that loan. The Bush loan was the exact sort of corporate benefit that helped sink Adelphia and WorldCom, whose CEO, Bernard J. Ebbers, received a $408 million, low-interest loan from the company. But that was then, and this is now . . .
It might seem that things could not get dirtier, yet they can. To add to the chronicle of greed and dishonesty just cited, there is the matter of hypocrisy. The hypocrisy is of signal importance to the developing world, which serves as the major victim of that hypocrisy.
The International Monetary Fund (IMF) functions as a sort of global economic policeman, requiring of countries that seek loans that they get their fiscal house in order as a precondition to economic assistance. One of the chief demands of the IMF is transparency.
In 1999 the IMF formulated its 'Code of Good Practices on Transparency in Monetary and Financial Policies.' This code calls for "good transparency practices for the formulation and reporting of monetary and financial policies." Time and again the IMF has insisted that developing nations adhere to principles of transparency, largely at the behest of the United States and the European nations.
The United States, it appears, has felt itself under no such compunction to compel transparency in its own internal fiscal affairs. Recent revelations have revealed that dishonesty and obfuscation run rampant in many American boardrooms, including boardrooms in which the President and Vice President have played prominent roles.
This is in large part why the American stock market is in free fall. Nobel laureate Joseph Stiglitz, former chief economist of the World Bank and a major critic of the IMF, has built his reputation on explaining the importance of the economics of information. As he says, "For markets to work, for the appropriate signals for efficient resource allocation to be provided, investors must have as much information as possible. Investors need assurance that information received adequately reflects the economic situation of a firm."
But such assurance has not been forthcoming in the United States. Instead, corporations have cooked their books, hiding their debt and artificially inflating profit. They have even - as in the case of WorldCom - falsified EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), the major measure of earnings flow, previously deemed beyond manipulation. Individual investors, pension funds, mutual shares funds, all are demanding honesty and openness in corporate accounting. They want transparency.
But a great number of corporate executives do not want changes that would compel transparency and severely penalize those who circumvent the honest reporting of financial data. They want to be able to report profits, whether their corporation actually has generated them or not, so their tenure remains secure. They want their corporations to loan them money. They want huge bundles of stock options without accounting for those options as a corporate expense. They want to manipulate stock prices, so that they can reap windfall profits from these options.
The powerful accounting lobby does not want to see changes either, since the majority of their revenue comes from consulting, not accounting. They love doing what Vice President Cheney called, in terms cited earlier, giving advice "over and above the normal by-the-books audit arrangement." That, after all, is where their largest profits lie.
President Bush and Vice President Cheney, ever mindful of campaign contributions from rich and powerful corporate executives, ever mindful of their circle of friends the wheelers and dealers and "captains of industry," ever mindful of their own past practices, are themselves in no hurry to see significant changes made.
None of this will stop the President, or the accountants, or the CEOs of multinational corporations, from demanding that developing nations adhere rigidly to the highest standards of accountability and transparency. The IMF will continue to do their bidding.
One could call it greed. Or dishonesty. Or hypocrisy.
Whatever it is, it is the current condition of the executive suites of government and business in America.
Huck Gutman is a columnist for the Statesman, Kolkata. He teaches at the University of Vermont and is the author, with Congressman Bernie Sanders, of Outsider in the House {Verso].
http://www.commondreams.org/views02/0712-02.htm
Monday, 8 February 2010
Sunday, 7 February 2010
How To Invest In The Australian Stock Market
How To Invest In The Australian Stock Market
by Michele Perdue
The heart of the stock market system in Australia is the Sydney Stock Exchange. The exchange lets investors both foreign and domestic supply the regional companies with the funds that are needed in order to expand the economy of Australia. You can be among the investors that deal with the yop-performing companies in the Australian market in just a few simple steps.
Your first step is to hire a broker that is registered with the Australian Stock Exchange; this stockbroker will be able to help you fill out the agreement forms, set up your international account for the trades and give you valuable advice on the changes and trends before you begin to invest.
Investment clubs are popular because they let the investors share the learning experience of how the stock exchanges work; you should gather some friends and fellow investors in an investment club to follow the Australian stock market together. When your club meets you should discuss your individual portfolios as well as observe the rising stocks.
In order to counteract the riskier investments it is advisable to purchase some futures in the Australian stock exchange. The people who invest in the futures will sell their shares back at a predetermined time with the price established before any transactions are made. Using this investment too you can have longer range stocks mixed in with the day trading.
One of the rapidly expanding industries in which to invest is the biotechnology industry. Take advantage of the rapid expansion of the biotechnology industry by investing in some of the hundreds of publicly owned and traded biotech firms that are accessible to the foreign investors. These are the ideal stocks if your intent is to invest over a long term in an industry that is gradually growing.
There are other things to consider and more investing options, Andrew Baxter who is an expert investor and hedge fund manager can offer you some great insights about investing in the Australian Share Market.
http://www.howtoinvesttoday.com/2009/10/02/how-to-invest-in-the-australian-stock-market/
by Michele Perdue
The heart of the stock market system in Australia is the Sydney Stock Exchange. The exchange lets investors both foreign and domestic supply the regional companies with the funds that are needed in order to expand the economy of Australia. You can be among the investors that deal with the yop-performing companies in the Australian market in just a few simple steps.
Your first step is to hire a broker that is registered with the Australian Stock Exchange; this stockbroker will be able to help you fill out the agreement forms, set up your international account for the trades and give you valuable advice on the changes and trends before you begin to invest.
Investment clubs are popular because they let the investors share the learning experience of how the stock exchanges work; you should gather some friends and fellow investors in an investment club to follow the Australian stock market together. When your club meets you should discuss your individual portfolios as well as observe the rising stocks.
In order to counteract the riskier investments it is advisable to purchase some futures in the Australian stock exchange. The people who invest in the futures will sell their shares back at a predetermined time with the price established before any transactions are made. Using this investment too you can have longer range stocks mixed in with the day trading.
One of the rapidly expanding industries in which to invest is the biotechnology industry. Take advantage of the rapid expansion of the biotechnology industry by investing in some of the hundreds of publicly owned and traded biotech firms that are accessible to the foreign investors. These are the ideal stocks if your intent is to invest over a long term in an industry that is gradually growing.
There are other things to consider and more investing options, Andrew Baxter who is an expert investor and hedge fund manager can offer you some great insights about investing in the Australian Share Market.
http://www.howtoinvesttoday.com/2009/10/02/how-to-invest-in-the-australian-stock-market/
Investing Tips For The Beginner
Investing Tips For The Beginner
by Micheal Jones
There are few general rules to remember and follow if you are starting to invest your money in the stock market. The first and most important thing to remember is that you will be contending with the ups and downs. You should not freak out when your stock takes a down0-turn and then immediately react by pulling out your money; that is actually the quickest and most effect way of losing you money.
People watch their stocks go down a bit, get scared and decide they need to abandon ship before they sink any farther. When that happens, they usually notice it going back up and then immediately regret the decision.
It won?t always be the case, but it?s a very good thing to remember as it very typically happens that way. If a stock goes down, then it will eventually come back up. The cases where this will not work is in the case of a company scandal where the company CEO?s are involved in embezzlement; this is the only reason you should sell right away after a downward turn.
The nature of the beast is that the stocks will fluctuate, and some fluctuations may be scary. If you?ve done your homework and you are not just investing on a whim or a gut feeling, then have confidence in your research. Investing is all about knowing the stocks you are investing in and knowing what things can affect them.
Here?s a great example: say you?ve hear some news about a new tax that will affect a clothing company and you know that this will adversely affect their bottom line, with this information you know that it would be a safe bet to steer clear of all textile companies as the new tax will surely be affecting them as well. Simply paying attention is all you need to be successful in the stock market.
Check out this great video; it has a number of questions and answers from an expert who can give you the low-down on investing.
About the Author:
If you wish to learn the best information on investing today you need to check out this free video right now!
http://www.howtoinvesttoday.com/2009/09/23/investing-tips-for-the-beginner/
by Micheal Jones
There are few general rules to remember and follow if you are starting to invest your money in the stock market. The first and most important thing to remember is that you will be contending with the ups and downs. You should not freak out when your stock takes a down0-turn and then immediately react by pulling out your money; that is actually the quickest and most effect way of losing you money.
People watch their stocks go down a bit, get scared and decide they need to abandon ship before they sink any farther. When that happens, they usually notice it going back up and then immediately regret the decision.
It won?t always be the case, but it?s a very good thing to remember as it very typically happens that way. If a stock goes down, then it will eventually come back up. The cases where this will not work is in the case of a company scandal where the company CEO?s are involved in embezzlement; this is the only reason you should sell right away after a downward turn.
The nature of the beast is that the stocks will fluctuate, and some fluctuations may be scary. If you?ve done your homework and you are not just investing on a whim or a gut feeling, then have confidence in your research. Investing is all about knowing the stocks you are investing in and knowing what things can affect them.
Here?s a great example: say you?ve hear some news about a new tax that will affect a clothing company and you know that this will adversely affect their bottom line, with this information you know that it would be a safe bet to steer clear of all textile companies as the new tax will surely be affecting them as well. Simply paying attention is all you need to be successful in the stock market.
Check out this great video; it has a number of questions and answers from an expert who can give you the low-down on investing.
About the Author:
If you wish to learn the best information on investing today you need to check out this free video right now!
http://www.howtoinvesttoday.com/2009/09/23/investing-tips-for-the-beginner/
How to Deal with Success in Investing
How to Deal with Success in Investing
The following factual story is from a US University experiment to understand the psychology of success. There has subsequently been many repeats of this experiment by different people in different locations.
The experiment asked people (experiment subjects) to guess the outcome of tossing a coin and measured how many times they guessed correctly and incorrectly.
The experiment involved tossing the coin 500 times and the law of probability says that you would guess right around 250 times or 50% of the time. This outcome is the same no matter how high or how low your IQ is, no matter where you went to school or how much you have studied the art of coin tossing. Just about everyone understands this and knows it.
However, within the 500 tosses you will have a good chance of stringing together a number of tosses in a row that you will guess correctly. This is where the psychology of success comes into effect. The experiment asked it’s subjects how they felt about their performance in tossing the coin and guessing the correct outcome at various times during the experiment.
What they found was that when people were having successful runs – four or five or six correct guesses in a row – that they believed that they themselves were responsible for this success. Reasons ranged from, I am getting better at this, to I am now concentrating harder and that is improving my performance.
Remember that all these people taking part in the experiment know that the outcome of a guess is based on a 50% probability outcome. Yet these same rational and normal people believe that when they guess a few coin tosses in a row correctly that it is due to their own talent and ability. The psychology of the brain is a scary thing.
This same effect occurs with people investing in the stock market all the time – and this is especially the case with people new to investing and trading. The investor or trader begins to believe, after a winning trade or two that they have some super “talent” for picking stocks and shares. They begin to believe that they have some natural talent that makes them better than the average trader.
The way to manage chance success in your trading/investing is to not become over confident and forget your risk management strategies. Enjoy your success but don’t forget the risks. If you do not manage the risk of future trades properly or take on too many trades and over-extend yourself then you may leave yourself volunerable to the Market Slap. The stock market has a habit of slapping down traders who become over confident and take on too much risk with a large loss.
The lesson to be learnt here is that every trade or investment involves risk and that every trader needs to manage the risk in every trade. This means not getting carried away with your successes and protecting your capital every step of the way. Beware the Market Slap!
http://www.howtoinvesttoday.com/2009/10/25/how-to-deal-with-success-in-investing/
The following factual story is from a US University experiment to understand the psychology of success. There has subsequently been many repeats of this experiment by different people in different locations.
The experiment asked people (experiment subjects) to guess the outcome of tossing a coin and measured how many times they guessed correctly and incorrectly.
The experiment involved tossing the coin 500 times and the law of probability says that you would guess right around 250 times or 50% of the time. This outcome is the same no matter how high or how low your IQ is, no matter where you went to school or how much you have studied the art of coin tossing. Just about everyone understands this and knows it.
However, within the 500 tosses you will have a good chance of stringing together a number of tosses in a row that you will guess correctly. This is where the psychology of success comes into effect. The experiment asked it’s subjects how they felt about their performance in tossing the coin and guessing the correct outcome at various times during the experiment.
What they found was that when people were having successful runs – four or five or six correct guesses in a row – that they believed that they themselves were responsible for this success. Reasons ranged from, I am getting better at this, to I am now concentrating harder and that is improving my performance.
Remember that all these people taking part in the experiment know that the outcome of a guess is based on a 50% probability outcome. Yet these same rational and normal people believe that when they guess a few coin tosses in a row correctly that it is due to their own talent and ability. The psychology of the brain is a scary thing.
This same effect occurs with people investing in the stock market all the time – and this is especially the case with people new to investing and trading. The investor or trader begins to believe, after a winning trade or two that they have some super “talent” for picking stocks and shares. They begin to believe that they have some natural talent that makes them better than the average trader.
The way to manage chance success in your trading/investing is to not become over confident and forget your risk management strategies. Enjoy your success but don’t forget the risks. If you do not manage the risk of future trades properly or take on too many trades and over-extend yourself then you may leave yourself volunerable to the Market Slap. The stock market has a habit of slapping down traders who become over confident and take on too much risk with a large loss.
The lesson to be learnt here is that every trade or investment involves risk and that every trader needs to manage the risk in every trade. This means not getting carried away with your successes and protecting your capital every step of the way. Beware the Market Slap!
http://www.howtoinvesttoday.com/2009/10/25/how-to-deal-with-success-in-investing/
How to Invest Today for your Financial Future: The Right Value Stocks
The Right Value Stocks
Buying value stocks is a good investment. The time is right to get stocks at reasonable prices. With the market making a comeback it’s a great time to invest in stock picks. Higher quality stocks can be purchased at standard company rates.
The time to strike is now as the iron is definitely hot! Okay, what is hot and what is not? The companies that are on an upward swing are smaller companies. This in itself does not imply that these would be the best stocks to invest in.
Normally the small companies are entrenched in debt. Also beware of the companies that represent huge problems of one kind or another. They usually are recognizable from having stocks that took a beating on the market.
Reading the right financial paper can provide insight into stocks and great strategies. One great tip is to invest in blue chips. Get them from a company that has no debt, and your investment will have the potential to skyrocket.
If you are not a risk taker it may be best to stick to buying value stocks which represent a lower risk. Stocks such as these are referenced as ‘Tortoise and Hare’ stocks. They consist of an accumulation of twenty five respectable companies each.
Old strategies are generally the best of course. Buy low and sell high! Take it one step farther and when a good company is having a lull, buy cheap and get rich. Sound investment choices are those of a food or medicinal quality.
Now is the best time to buy value stocks. With the market recuperating from the recent onslaught, price of stocks are very reasonable. Take your time, but not too much time. Assess all of your options before making a final choice.
For stock tips subscribe to our free newsletter at WallStreetWindow.com
http://www.howtoinvesttoday.com/2010/02/06/the-right-value-stocks/
Buying value stocks is a good investment. The time is right to get stocks at reasonable prices. With the market making a comeback it’s a great time to invest in stock picks. Higher quality stocks can be purchased at standard company rates.
The time to strike is now as the iron is definitely hot! Okay, what is hot and what is not? The companies that are on an upward swing are smaller companies. This in itself does not imply that these would be the best stocks to invest in.
Normally the small companies are entrenched in debt. Also beware of the companies that represent huge problems of one kind or another. They usually are recognizable from having stocks that took a beating on the market.
Reading the right financial paper can provide insight into stocks and great strategies. One great tip is to invest in blue chips. Get them from a company that has no debt, and your investment will have the potential to skyrocket.
If you are not a risk taker it may be best to stick to buying value stocks which represent a lower risk. Stocks such as these are referenced as ‘Tortoise and Hare’ stocks. They consist of an accumulation of twenty five respectable companies each.
Old strategies are generally the best of course. Buy low and sell high! Take it one step farther and when a good company is having a lull, buy cheap and get rich. Sound investment choices are those of a food or medicinal quality.
Now is the best time to buy value stocks. With the market recuperating from the recent onslaught, price of stocks are very reasonable. Take your time, but not too much time. Assess all of your options before making a final choice.
For stock tips subscribe to our free newsletter at WallStreetWindow.com
http://www.howtoinvesttoday.com/2010/02/06/the-right-value-stocks/
Succession Planning: The leader you like or the leader you need?
Succession Planning: The leader you like or the leader you need?
Published: 6/02/2010 at 12:00 AM
Newspaper section: Business
One major factor in determining an organisation's character, direction and future is the character of its leaders. This is why leading organisations worldwide attach considerable importance and investment into finding good leaders, leaders who can respond to expectations and to the organisational direction and changing circumstances to create success and sustainable growth.
How can organisations be confident that the leaders they choose will be well-suited for dealing with the organisation, its challenges and future? What characteristics and qualifications should the organisation leader have? And what parameters and characteristics should be used for this consideration?
For almost two years, an alliance of APM Group and Hogan (a leading global company specialising in personnel evaluation) has done research in this area. The goal is to find the qualifications of leaders who will be suitable successors, leaders who will best be able to face a continuously changing business future and best be able to handle the current and future competition and competitive environment.
We started by finding information on high-performance CEOs in America, Europe and Asia. Initially, we could not clearly identify common characteristics and qualifications. So we narrowed our focus to good performance in profit and expansion of business growth. Finally, we obtained information on 55 leading organisations with double profit expansion every year.
We also studied 94 leading organisations that have shown the best succession planning. We considered what characteristics and qualifications the successors of these organisations had by specifically emphasising the people undergoing succession planning. We studied how the 94 organisations prepared their people and what qualifications the people had.
Next, we compared the obtained information with the information from the first 55 organisations to find similarities and differences. We also considered 405 middle talent managers who have been under talent management plans for five consecutive years.
These are the information sources I studied to bring that important and useful information to further exchange with readers.
The leader you "like" and the "ideal" leader: I have worked closely with executives of many leading organisations over my 18 years as a consultant, and one question I always ask is whether they use old information when selecting people or in succession planning. It is an issue I want all executives to consider.
Currently, leading organisations use the current situation or future plans to prepare and select qualifications and characteristics for new successors. The past is not usually taken into consideration.
Finding new characteristics and qualifications for organisation leaders is very important. It is a significant factor that affects the organisation model, business operation, strategy and future of the organisation for more than 10 years. Therefore, selecting a new leader is delicate and must be seriously done in an in-depth manner.
The leader must be both a person you like and the ideal person for the position. Organisations have to ask themselves what information they use when they make succession plans, whether they consider previous guidelines or future expectations.
Today, organisations have a forward-focus: they look to tomorrow and not to yesterday. In the past, old methods and old qualifications might have been successful and suitable. There is nothing wrong with methods and qualifications that have been proven successful in the past. But today's e-world revolves faster: we have to closely watch trading and business operations - every second, it seems.
Currently, the rate of change is fast. There are a myriad more factors, situations, information sources and data. And there are requirements with which we must be more careful than in the past. So we have to be careful when we ask ourselves if the leader we intend to select is the person we like and is also ideal for the position.
Today, organisations are focusing their readiness on those areas they expect to increase or change in the future. And they need to ask themselves whether the leader they are looking to can deal with those things. While many organisations still adhere to old models that used to be successful in the past, they need to ask whether those methods can still be used now.
Some of the old methods can - should - be kept, but they need to be carefully considered in the light of expected future events and changes. In those areas where the older methods will not work, organisations need to consider new requirements both in-depth and widely, in order to select the most suitable and most ideal leader.
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Arinya Talerngsri is managing director at the APM Group, Thailand's leading Organisation & People Development Consultancy. Write her at arinyat@apm.co.th
http://www.bangkokpost.com/business/economics/32439/succession-planning-the-leader-you-like-or-the-leader-you-need
Published: 6/02/2010 at 12:00 AM
Newspaper section: Business
One major factor in determining an organisation's character, direction and future is the character of its leaders. This is why leading organisations worldwide attach considerable importance and investment into finding good leaders, leaders who can respond to expectations and to the organisational direction and changing circumstances to create success and sustainable growth.
How can organisations be confident that the leaders they choose will be well-suited for dealing with the organisation, its challenges and future? What characteristics and qualifications should the organisation leader have? And what parameters and characteristics should be used for this consideration?
For almost two years, an alliance of APM Group and Hogan (a leading global company specialising in personnel evaluation) has done research in this area. The goal is to find the qualifications of leaders who will be suitable successors, leaders who will best be able to face a continuously changing business future and best be able to handle the current and future competition and competitive environment.
We started by finding information on high-performance CEOs in America, Europe and Asia. Initially, we could not clearly identify common characteristics and qualifications. So we narrowed our focus to good performance in profit and expansion of business growth. Finally, we obtained information on 55 leading organisations with double profit expansion every year.
We also studied 94 leading organisations that have shown the best succession planning. We considered what characteristics and qualifications the successors of these organisations had by specifically emphasising the people undergoing succession planning. We studied how the 94 organisations prepared their people and what qualifications the people had.
Next, we compared the obtained information with the information from the first 55 organisations to find similarities and differences. We also considered 405 middle talent managers who have been under talent management plans for five consecutive years.
These are the information sources I studied to bring that important and useful information to further exchange with readers.
The leader you "like" and the "ideal" leader: I have worked closely with executives of many leading organisations over my 18 years as a consultant, and one question I always ask is whether they use old information when selecting people or in succession planning. It is an issue I want all executives to consider.
Currently, leading organisations use the current situation or future plans to prepare and select qualifications and characteristics for new successors. The past is not usually taken into consideration.
Finding new characteristics and qualifications for organisation leaders is very important. It is a significant factor that affects the organisation model, business operation, strategy and future of the organisation for more than 10 years. Therefore, selecting a new leader is delicate and must be seriously done in an in-depth manner.
The leader must be both a person you like and the ideal person for the position. Organisations have to ask themselves what information they use when they make succession plans, whether they consider previous guidelines or future expectations.
Today, organisations have a forward-focus: they look to tomorrow and not to yesterday. In the past, old methods and old qualifications might have been successful and suitable. There is nothing wrong with methods and qualifications that have been proven successful in the past. But today's e-world revolves faster: we have to closely watch trading and business operations - every second, it seems.
Currently, the rate of change is fast. There are a myriad more factors, situations, information sources and data. And there are requirements with which we must be more careful than in the past. So we have to be careful when we ask ourselves if the leader we intend to select is the person we like and is also ideal for the position.
Today, organisations are focusing their readiness on those areas they expect to increase or change in the future. And they need to ask themselves whether the leader they are looking to can deal with those things. While many organisations still adhere to old models that used to be successful in the past, they need to ask whether those methods can still be used now.
Some of the old methods can - should - be kept, but they need to be carefully considered in the light of expected future events and changes. In those areas where the older methods will not work, organisations need to consider new requirements both in-depth and widely, in order to select the most suitable and most ideal leader.
--------------------------------------------------------------------------------
Arinya Talerngsri is managing director at the APM Group, Thailand's leading Organisation & People Development Consultancy. Write her at arinyat@apm.co.th
http://www.bangkokpost.com/business/economics/32439/succession-planning-the-leader-you-like-or-the-leader-you-need
Change is a constant in living. To not change is not to live at all.
A good government gives support to all its people.
A good government facilitates the progress of all its people.
In Malaysia, the government gives little support to the significant minorities and other selected groups.
In fact the government hinders their progress.
The present policies limit their quest for better living and their contributions for a better society - socially, economically and politically.
Unless there is a significant change in the thinking and policies of the present elected government, continuing with the old thinking and policies is a recipe for disaster in the future for nation building.
Hopefully, changes will come and come quickly too.
You can either hope for a change in policies or a change in people ruling.
By the way, many are unclear what 1Malaysia is all about, especially regarding its objectives..
----
From the Star Newspaper
http://archives.thestar.com.my/last365days/default.aspx?query=the+brain+drain
Documents 1 to 10 of 74 matching the query "the brain drain"
1.
The Malay dilemma
[BUSINESS 6-Feb-2010]
Malaysian Institute of Economic Research distinguished fellow Professor Datuk Dr Mohamed Ariff shares his thought on the issue of brain drain and the Malay dilemma.
2.
Stemming the tide and keeping our talent
[BUSINESS 6-Feb-2010]
Every now and then, we hear of friends and relatives leaving for greener pastures abroad. While we are happy that they are moving on, their leaving also leaves a lump in our throats. Last month, the issue of our people leaving was brought up again when about 300,000 left, double that of the previous year. Do we, as a n
3.
Our loss is another country’s gain
[BUSINESS 6-Feb-2010]
OVER the last decade, the Malaysian Government has been actively pursuing high-skilled professionals, such as researchers, scientists, doctors, engineers and information-technology experts, to work in the country.
4.
Doctor forced to transfer once again
[FOCUS 5-Feb-2010]
From PATIENT, Kuala Lumpur.
5.
Is there a lesson for M'sia from what happened in US last month?
[BUSINESS 1-Feb-2010]
At home, a divided Malaysia on racial and religious grounds is like a divided America on ideological grounds. Inspirational leadership will be required to bring together the various factions under an inclusive and liberal 1Malaysia concept that is not threatened by just a single word.
A good government facilitates the progress of all its people.
In Malaysia, the government gives little support to the significant minorities and other selected groups.
In fact the government hinders their progress.
The present policies limit their quest for better living and their contributions for a better society - socially, economically and politically.
Unless there is a significant change in the thinking and policies of the present elected government, continuing with the old thinking and policies is a recipe for disaster in the future for nation building.
Hopefully, changes will come and come quickly too.
You can either hope for a change in policies or a change in people ruling.
By the way, many are unclear what 1Malaysia is all about, especially regarding its objectives..
----
From the Star Newspaper
http://archives.thestar.com.my/last365days/default.aspx?query=the+brain+drain
Documents 1 to 10 of 74 matching the query "the brain drain"
1.
The Malay dilemma
[BUSINESS 6-Feb-2010]
Malaysian Institute of Economic Research distinguished fellow Professor Datuk Dr Mohamed Ariff shares his thought on the issue of brain drain and the Malay dilemma.
2.
Stemming the tide and keeping our talent
[BUSINESS 6-Feb-2010]
Every now and then, we hear of friends and relatives leaving for greener pastures abroad. While we are happy that they are moving on, their leaving also leaves a lump in our throats. Last month, the issue of our people leaving was brought up again when about 300,000 left, double that of the previous year. Do we, as a n
3.
Our loss is another country’s gain
[BUSINESS 6-Feb-2010]
OVER the last decade, the Malaysian Government has been actively pursuing high-skilled professionals, such as researchers, scientists, doctors, engineers and information-technology experts, to work in the country.
4.
Doctor forced to transfer once again
[FOCUS 5-Feb-2010]
From PATIENT, Kuala Lumpur.
5.
Is there a lesson for M'sia from what happened in US last month?
[BUSINESS 1-Feb-2010]
At home, a divided Malaysia on racial and religious grounds is like a divided America on ideological grounds. Inspirational leadership will be required to bring together the various factions under an inclusive and liberal 1Malaysia concept that is not threatened by just a single word.
Saturday, 6 February 2010
A Bear Reawakens After a Bullish Run
FUND TRACK JANUARY 27, 2010
A Bear Reawakens After a Bullish Run
GMO's Grantham Warns of a Stock Bubble
By JONATHAN BURTON
Jeremy Grantham, the investment guru who correctly predicted the 2009 market rally, now warns that a new bubble is forming.
Stocks are likely to move higher in coming months, but prices are expensive, and long-term investors should be mindful of a volatile mix that Federal Reserve policy and government actions are causing, according to Mr. Grantham, the frequently bearish chief investment strategist at Boston-based institutional money manager GMO.
GMO's chief investment strategist, Jeremy Grantham, has returned to his bearish bent, saying easy money is inflating stocks.
"Once again, the Fed is playing with fire," Mr. Grantham wrote in his latest quarterly letter to institutional clients.
The Fed's policy of low interest rates and easy money has boosted the economy but has stimulated Wall Street and stocks even more, Mr. Grantham says.
That is why, much to his dismay, he sees another large speculative wave forming.
"I was counting on the Fed and the Administration to begin to get the point that low rates held too long promote asset bubbles, which are extremely dangerous to the economy and the financial system," he writes.
"Now, however, the penny is dropping," he says, "and I realize the Fed is unwittingly willing to risk a third speculative phase, which is supremely dangerous this time because its arsenal now is almost empty."
At the same time, Mr. Grantham says, higher prices suggest a stock market that is increasingly stable and confident, encouraging investors to buy first and ask questions later, if at all.
The upside, at least in the short term, is that speculation will drive the stock market for the next several months, he believes. Accordingly, he says GMO's strategy will be to "very slowly" trim equity positions and to "swallow our distaste for parking the rest in unattractive fixed-income."
This next leg up will be unlike 2009's rally, when low-quality and riskier stocks fared best, Mr. Grantham says.
He expects a broader advance, "in which high-quality stocks should hold their own or even outperform."
But it will be a false rally, he finds. The Standard & Poor's 500-stock index is worth "850 or so; thus any advance from here will make it once again seriously overpriced." The S&P 500 closed Tuesday at 1092.17.
Mr. Grantham is frequently bearish, so it was uncharacteristic in March 2009 when he urged investors to buy stocks. His timing, at the bottom of the market, was correct, just as it was in late 2007, when he warned that stocks were precariously perched.
Going forward, Mr. Grantham predicts a "multiyear headwind" on the markets, during which investors will see "below-average profit margins" and price/earnings ratios in a period more akin to the bumpy 1970s than the bumper 1990s.
Over what Mr. Grantham calls the next "seven lean years," GMO forecasts large-cap U.S. stocks to deliver a real return (after inflation) of 1.3% annualized, while small-caps provide a 0.5% return.
The outlook is better for high-quality U.S. stocks, which have an expected yearly return of 6.8%.
"For the longer term, the outperformance of high quality U.S. blue chips compared with the rest of U.S. stocks is … nearly certain," Mr. Grantham says.
International stocks also fare reasonably well in GMO's model, up about 4.7% annualized over the seven-year period, while emerging markets come in with a 3.9% annualized gain.
"Going into this next decade, we start with the U.S. overpriced," Mr. Grantham cautions, "so do not be conned into believing that every bad decade is followed by a good one."
http://online.wsj.com/article/SB10001424052748704905604575027602834843606.html?mod=WSJ_Markets_LEFTTopNews
A Bear Reawakens After a Bullish Run
GMO's Grantham Warns of a Stock Bubble
By JONATHAN BURTON
Jeremy Grantham, the investment guru who correctly predicted the 2009 market rally, now warns that a new bubble is forming.
Stocks are likely to move higher in coming months, but prices are expensive, and long-term investors should be mindful of a volatile mix that Federal Reserve policy and government actions are causing, according to Mr. Grantham, the frequently bearish chief investment strategist at Boston-based institutional money manager GMO.
GMO's chief investment strategist, Jeremy Grantham, has returned to his bearish bent, saying easy money is inflating stocks.
"Once again, the Fed is playing with fire," Mr. Grantham wrote in his latest quarterly letter to institutional clients.
The Fed's policy of low interest rates and easy money has boosted the economy but has stimulated Wall Street and stocks even more, Mr. Grantham says.
That is why, much to his dismay, he sees another large speculative wave forming.
"I was counting on the Fed and the Administration to begin to get the point that low rates held too long promote asset bubbles, which are extremely dangerous to the economy and the financial system," he writes.
"Now, however, the penny is dropping," he says, "and I realize the Fed is unwittingly willing to risk a third speculative phase, which is supremely dangerous this time because its arsenal now is almost empty."
At the same time, Mr. Grantham says, higher prices suggest a stock market that is increasingly stable and confident, encouraging investors to buy first and ask questions later, if at all.
The upside, at least in the short term, is that speculation will drive the stock market for the next several months, he believes. Accordingly, he says GMO's strategy will be to "very slowly" trim equity positions and to "swallow our distaste for parking the rest in unattractive fixed-income."
This next leg up will be unlike 2009's rally, when low-quality and riskier stocks fared best, Mr. Grantham says.
He expects a broader advance, "in which high-quality stocks should hold their own or even outperform."
But it will be a false rally, he finds. The Standard & Poor's 500-stock index is worth "850 or so; thus any advance from here will make it once again seriously overpriced." The S&P 500 closed Tuesday at 1092.17.
Mr. Grantham is frequently bearish, so it was uncharacteristic in March 2009 when he urged investors to buy stocks. His timing, at the bottom of the market, was correct, just as it was in late 2007, when he warned that stocks were precariously perched.
Going forward, Mr. Grantham predicts a "multiyear headwind" on the markets, during which investors will see "below-average profit margins" and price/earnings ratios in a period more akin to the bumpy 1970s than the bumper 1990s.
Over what Mr. Grantham calls the next "seven lean years," GMO forecasts large-cap U.S. stocks to deliver a real return (after inflation) of 1.3% annualized, while small-caps provide a 0.5% return.
The outlook is better for high-quality U.S. stocks, which have an expected yearly return of 6.8%.
"For the longer term, the outperformance of high quality U.S. blue chips compared with the rest of U.S. stocks is … nearly certain," Mr. Grantham says.
International stocks also fare reasonably well in GMO's model, up about 4.7% annualized over the seven-year period, while emerging markets come in with a 3.9% annualized gain.
"Going into this next decade, we start with the U.S. overpriced," Mr. Grantham cautions, "so do not be conned into believing that every bad decade is followed by a good one."
http://online.wsj.com/article/SB10001424052748704905604575027602834843606.html?mod=WSJ_Markets_LEFTTopNews
How to pick the best stocks to invest
How to pick the best stocks to invest in Part 1 of 2
It takes the best stock market predictions to achieve top stock market results, but choosing the best stocks to invest in is not easy. One approach professional investors and traders use is the fundamental analysis of stocks, where others prefer the technical analysis of stock market trend.
The fundamental analysis of stocks is based on criteria like Earnings per share, Price/Earnings ratio, PEG Ratio, Return on equity and Return on assets.
Whether you are looking for the best penny stocks to buy or any other hot stocks to trade, you will find the following five out 10 fundamental key metrics very useful. They pinpoint the characteristics shared by the top performing stocks before they made huge trading profits in short term.
1. Earnings per share - EPS
Definition:
EPS is the ratio of the company's net income to its number of outstanding shares (all stocks held by investors and the company's insiders).
What it measures:
Earnings-per-share (EPS) serves as an indicator of a company's profitability.
Recommended value:
No less than 80.
Interpretation:
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
Observation:
There are many ways to define "earnings" and "shares outstanding". That led to different type of EPS.
2. Price/Earnings Ratio - P/E Ratio
Definition:
Ratio of a company' share price to its earnings per share.
What it measures:
How much investors are willing to pay per dollar of earnings.
Recommended value:
The best stocks to invest in usually have higher P/E compared to the market or industry average.
Interpretation:
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
Observation:
There are different types of P/E but the most used is the trailing P/E calculated with the EPS from last four quarters.
3. Price/Earnings To Growth ratio - PEG Ratio
Definition:
PEG Ratio is the price/earnings(P/E) ratio divided by the projected year-over-year earnings growth rate.
What it measures:
How cheap the stock is.
Recommended value:
Less than one (PEG < 1)
Interpretation:
The value of PEG ratio
-below one is an indication of possibly undervalued stock.
-equals one suggests the market is pricing the stock to fully reflect the stock's EPS growth.
-above one means the stock is possibly overvalued or the stock market expects future EPS growth to be greater than what is currently in the street consensus number.
Observation:
PEG ratio cannot be used in isolation.
4. Return on equity - ROE
Definition:
It is the ratio of the company’s 12 month net income to its shareholder equity (book value).
What it measures:
How profitable the company is.
Recommended value:
No Less than one 15%.
Interpretation:
High debt companies have higher return-on-equities(ROEs) than low debt companies.
Observation:
Relying on ROE has a downside. You will end up overweighting your portfolio with high-debt stocks if you go by return-on-equity(ROE) alone.
5. Return on assets - ROA
Definition:
It's the net income divided by total assets.
What it measures:
How profitable the company is in relation to its total assets.
Recommended value:
Return on assets above 20% and higher is better. Avoid company with Return on assets below 5%.
Interpretation:
The lower the debt, the higher the Return on assets. A rising Return on Assets usually foretells a rising stock price.
Observation:
The assets of the company are comprised of both debt and equity. The ROA is some time called ROI.
In Part 2, we will look at the stocks fundamentals like Relative price strength, Cash Flow, Financial leverage ratio, Consencus-earnings-forecast
----
How to pick the best stocks to buy Part 2 of 2
As noted in Part 1 of this two-part article, successful online stock investing is about picking the best stocks to buy. Some professional investors and traders use the fundamental analysis of stocks, other rely on technical analysis of the financial markets.
The fundamental analysis of stocks is based on criteria like Relative price strength, Cash Flow, Financial leverage ratio, Consencus-earnings-forecast.
Whether you are looking for best penny stocks to buy or any other hot stocks to trade, you will find very useful the following 5 out 10 most important fundamental factors shared by the top performing stocks before they made huge stock market profits in short term.
1. Relative Price Strength - RPS
Definition:
Relative price strength( RPS) is the ratio of the price performance of a stock by the price performance of an appropriate index for the same time period.
What it measures:
How stocks have performed compared to the overall market over a particular period.
Recommended value:
Relative price strength(RPS) with a value of at least 70.
Interpretation:
Stocks with relative strength above 70 tend to continue to outperform other stocks.
Observation:
Avoid stocks with 12 month relative strength below 50 or stocks which three-month relative price strength drops 20% from its 12-month relative strength.
2. Cash Flow
Definition:
Amount of money that move into or out of, a company’s bank accounts during the reporting period.
What it measures:
How viable is the company in short-term? What is its ability to pay bills.
Recommended value:
Any positive number is OK, but it’s best if the operating cash flow (i.e.: cash flow attributable to the company’s main business) exceeds the net income for the same period.
Interpretation:
Stock of companies with more cash flow has greater chance to rise more.
Observation:
Stock's price of companies with little cash to support their operations is likely to stagnate or fall.
3. Financial Leverage Ratio - F/L Ratio
Definition:
Financial leverage ratio = total assets divided by shareholders equity.
What it measures:
Level of Company’s debt. Is the company submerged in debt?
Recommended value:
F/L of one means no debt. F/L less than five( 5).
Interpretation:
The higher the F/L ratio, the more the debt.
Observation:
Avoid companies with leverage ratios above 5 which the average of S&P500 index. P.S: Banks and other financial organizations always carry high debt compared to firms in other industry.
4. Consensus Earnings Forecast - CEF
Definition:
Consensus earnings forecast is the average of analysts’ forecasts.
What it measures:
Consensus about the earnings estimated by analysts.
Recommended value:
Avoid stocks where the latest fiscal-year estimates are more than two cents below the 90-days-ago figures.
Interpretation:
The higher the F/L ratio, the more the debt.
Observation:
CEF changes move stock prices. So negative forecast trend warns of future forecast reduction, which will likely pressure the share price.
5. Institutional Ownership
Definition:
Institutional ownership is the percentage of share held by mutual funds, pension plans, banks, and other big holders. Institutional ownership for in-favor of the best stocks to buy is usually between 30% to 60% of shares outstanding, and rarely below 30%.
What it measures:
How many shares are owned by institutions.
Recommended value:
Choose stocks with more than 30% institutional ownership.
Interpretation:
A stock with small % held by institutions is out of favor with investment professionals. That means they don't see the potential of profit. Do not try to outguess the investment experts.
Observation:
Avoid stocks with less than 30% institutional ownership.
These fundamentals indicators should be used in addition to the five other metrics mentioned in the article How to pick the best stocks to invest in part 1 of 2.
http://www.stockonrise.com/stock-trading-information/53-world-stock-exchange/143-how-to-pick-the-best-stocks-to-invest-in-part-1-of-2.html
http://www.stockonrise.com/stock-trading-information/53-world-stock-exchange/145-how-to-pick-the-best-stocks-to-buy-part-2-of-2.html
It takes the best stock market predictions to achieve top stock market results, but choosing the best stocks to invest in is not easy. One approach professional investors and traders use is the fundamental analysis of stocks, where others prefer the technical analysis of stock market trend.
The fundamental analysis of stocks is based on criteria like Earnings per share, Price/Earnings ratio, PEG Ratio, Return on equity and Return on assets.
Whether you are looking for the best penny stocks to buy or any other hot stocks to trade, you will find the following five out 10 fundamental key metrics very useful. They pinpoint the characteristics shared by the top performing stocks before they made huge trading profits in short term.
1. Earnings per share - EPS
Definition:
EPS is the ratio of the company's net income to its number of outstanding shares (all stocks held by investors and the company's insiders).
What it measures:
Earnings-per-share (EPS) serves as an indicator of a company's profitability.
Recommended value:
No less than 80.
Interpretation:
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
Observation:
There are many ways to define "earnings" and "shares outstanding". That led to different type of EPS.
2. Price/Earnings Ratio - P/E Ratio
Definition:
Ratio of a company' share price to its earnings per share.
What it measures:
How much investors are willing to pay per dollar of earnings.
Recommended value:
The best stocks to invest in usually have higher P/E compared to the market or industry average.
Interpretation:
If a company has displayed good growth over the last five- or 10-year period, it is likely to continue doing so in the next five to 10 years.
Observation:
There are different types of P/E but the most used is the trailing P/E calculated with the EPS from last four quarters.
3. Price/Earnings To Growth ratio - PEG Ratio
Definition:
PEG Ratio is the price/earnings(P/E) ratio divided by the projected year-over-year earnings growth rate.
What it measures:
How cheap the stock is.
Recommended value:
Less than one (PEG < 1)
Interpretation:
The value of PEG ratio
-below one is an indication of possibly undervalued stock.
-equals one suggests the market is pricing the stock to fully reflect the stock's EPS growth.
-above one means the stock is possibly overvalued or the stock market expects future EPS growth to be greater than what is currently in the street consensus number.
Observation:
PEG ratio cannot be used in isolation.
4. Return on equity - ROE
Definition:
It is the ratio of the company’s 12 month net income to its shareholder equity (book value).
What it measures:
How profitable the company is.
Recommended value:
No Less than one 15%.
Interpretation:
High debt companies have higher return-on-equities(ROEs) than low debt companies.
Observation:
Relying on ROE has a downside. You will end up overweighting your portfolio with high-debt stocks if you go by return-on-equity(ROE) alone.
5. Return on assets - ROA
Definition:
It's the net income divided by total assets.
What it measures:
How profitable the company is in relation to its total assets.
Recommended value:
Return on assets above 20% and higher is better. Avoid company with Return on assets below 5%.
Interpretation:
The lower the debt, the higher the Return on assets. A rising Return on Assets usually foretells a rising stock price.
Observation:
The assets of the company are comprised of both debt and equity. The ROA is some time called ROI.
In Part 2, we will look at the stocks fundamentals like Relative price strength, Cash Flow, Financial leverage ratio, Consencus-earnings-forecast
----
How to pick the best stocks to buy Part 2 of 2
As noted in Part 1 of this two-part article, successful online stock investing is about picking the best stocks to buy. Some professional investors and traders use the fundamental analysis of stocks, other rely on technical analysis of the financial markets.
The fundamental analysis of stocks is based on criteria like Relative price strength, Cash Flow, Financial leverage ratio, Consencus-earnings-forecast.
Whether you are looking for best penny stocks to buy or any other hot stocks to trade, you will find very useful the following 5 out 10 most important fundamental factors shared by the top performing stocks before they made huge stock market profits in short term.
1. Relative Price Strength - RPS
Definition:
Relative price strength( RPS) is the ratio of the price performance of a stock by the price performance of an appropriate index for the same time period.
What it measures:
How stocks have performed compared to the overall market over a particular period.
Recommended value:
Relative price strength(RPS) with a value of at least 70.
Interpretation:
Stocks with relative strength above 70 tend to continue to outperform other stocks.
Observation:
Avoid stocks with 12 month relative strength below 50 or stocks which three-month relative price strength drops 20% from its 12-month relative strength.
2. Cash Flow
Definition:
Amount of money that move into or out of, a company’s bank accounts during the reporting period.
What it measures:
How viable is the company in short-term? What is its ability to pay bills.
Recommended value:
Any positive number is OK, but it’s best if the operating cash flow (i.e.: cash flow attributable to the company’s main business) exceeds the net income for the same period.
Interpretation:
Stock of companies with more cash flow has greater chance to rise more.
Observation:
Stock's price of companies with little cash to support their operations is likely to stagnate or fall.
3. Financial Leverage Ratio - F/L Ratio
Definition:
Financial leverage ratio = total assets divided by shareholders equity.
What it measures:
Level of Company’s debt. Is the company submerged in debt?
Recommended value:
F/L of one means no debt. F/L less than five( 5).
Interpretation:
The higher the F/L ratio, the more the debt.
Observation:
Avoid companies with leverage ratios above 5 which the average of S&P500 index. P.S: Banks and other financial organizations always carry high debt compared to firms in other industry.
4. Consensus Earnings Forecast - CEF
Definition:
Consensus earnings forecast is the average of analysts’ forecasts.
What it measures:
Consensus about the earnings estimated by analysts.
Recommended value:
Avoid stocks where the latest fiscal-year estimates are more than two cents below the 90-days-ago figures.
Interpretation:
The higher the F/L ratio, the more the debt.
Observation:
CEF changes move stock prices. So negative forecast trend warns of future forecast reduction, which will likely pressure the share price.
5. Institutional Ownership
Definition:
Institutional ownership is the percentage of share held by mutual funds, pension plans, banks, and other big holders. Institutional ownership for in-favor of the best stocks to buy is usually between 30% to 60% of shares outstanding, and rarely below 30%.
What it measures:
How many shares are owned by institutions.
Recommended value:
Choose stocks with more than 30% institutional ownership.
Interpretation:
A stock with small % held by institutions is out of favor with investment professionals. That means they don't see the potential of profit. Do not try to outguess the investment experts.
Observation:
Avoid stocks with less than 30% institutional ownership.
These fundamentals indicators should be used in addition to the five other metrics mentioned in the article How to pick the best stocks to invest in part 1 of 2.
http://www.stockonrise.com/stock-trading-information/53-world-stock-exchange/143-how-to-pick-the-best-stocks-to-invest-in-part-1-of-2.html
http://www.stockonrise.com/stock-trading-information/53-world-stock-exchange/145-how-to-pick-the-best-stocks-to-buy-part-2-of-2.html
Investing decision: Focus on Cash Flows (FCF & Dividends) rather than Accruals (Earnings)
Investing Decisions
How much should you invest and what assets should you invest in?
Criterion: To maximise the returns to and wealth of the investors.
The value of the firm is increased by
An important characteristic of investing decision is how you approach this problem: You should focus on the cash flows instead of accruals.
- Expenses vs. Cash Outflows
- is cash outflow
- is not cash outflow
-Revenues vs Cash Inflows
- is cash inflow
Focus of cash flows: Free Cash Flows and Dividend
rather than
Focus on accruals: Earnings
The investing decisions by the firm typically have long term consequences to the firm over many years (3 years to 100 years).
When investing, the investors have a projection of what the future cash inflows and future cash outflows of the firms might be but the investors cannot be certain of these future cash flows.
Therefore, the investors also need to focus on the significant risks associated with this projections of future cash flows when making their investing decision..
How much should you invest and what assets should you invest in?
Criterion: To maximise the returns to and wealth of the investors.
The value of the firm is increased by
- cash flows generated by the firm which support the price of the stock or
- the dividend returned to the owners.
An important characteristic of investing decision is how you approach this problem: You should focus on the cash flows instead of accruals.
- Expenses vs. Cash Outflows
- Purchase of capital asset
- is cash outflow
- Recognition of depreciation expense
- is not cash outflow
-Revenues vs Cash Inflows
- Borrowing funds
- is cash inflow
Focus of cash flows: Free Cash Flows and Dividend
rather than
Focus on accruals: Earnings
The investing decisions by the firm typically have long term consequences to the firm over many years (3 years to 100 years).
When investing, the investors have a projection of what the future cash inflows and future cash outflows of the firms might be but the investors cannot be certain of these future cash flows.
Therefore, the investors also need to focus on the significant risks associated with this projections of future cash flows when making their investing decision..
The most popular method: buy or sell shares WITHOUT employing any valuation method
Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.
And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.
Invest wisely or get flattened by elephants
Invest wisely or get flattened by elephants
Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.
MARCUS PADLEY
February 6, 2010
Archie had his birthday this week. Seven. He is a wonderful kid having inherited all the best bits of his Mum and Dad with his everlasting smile, impartial consideration for others, dazzling good looks, the ability to talk the hind leg off a donkey, and his obsession with money - only one of which he got from me.
He is also a dedicated inquisitor, incessantly bombarding us with questions such as "Dad, what goes faster, a big jet or a small jet", "Dad, if you ditch the ants, are there more animals or humans in the world", "Dad, what would you prefer, to be sat on by an elephant, or poked in the eye by a baboon", "Dad, how many people are fishing in the world right now" and "Dad, how much money do you have in the bank".
We used to argue the relevance of the questions or the connection between the alternatives he presented but after four years of barrage we have now just learnt to answer "Animals","Big jets", "Sat on by an elephant" or "64,675,432", which unfortunately is not the amount of money I have in the bank.
So you can imagine the attack when Archie saw his first share price chart.
As rumour would have it, the most popular method of telling you what a share price should be is some form of Buffettology. Its reach is universal. There is hardly a man on the street who would not profess some ability and intention to invest on the sensible and highly publicised principles of value assessment and patience that "the Warren Buffett Way" supports. But allow me to let you in on a sharemarket secret.
Scary, but that's how shares prices move most of the time, without anyone doing any assessment of value.
There are two very different things going on in the market and every time you put on an order you have to choose to exploit one or the other with nothing in the middle.
Both are OK, both have intellectual pull, neither has the moral high ground (although many think they have) and you can do both at the same time. But as a buyer and seller of shares you do need to ask yourself every time an order goes on the screen "Just what am I doing?" because perhaps one of the most prevalent and enduring mistakes among clients and advisors alike is the use of the language of rational value investment as the pretence for disorderly trade. It is everywhere.
So what are you going to do?
Because I can guarantee that until you stop kidding yourself that
Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today.
http://www.smh.com.au/business/invest-wisely-or-get-flattened-by-elephants-20100205-nilc.html
Also read:
Paying the price of a new Mercedes to buy a new Proton! Beware of manipulators in the market place
Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.
MARCUS PADLEY
February 6, 2010
Archie had his birthday this week. Seven. He is a wonderful kid having inherited all the best bits of his Mum and Dad with his everlasting smile, impartial consideration for others, dazzling good looks, the ability to talk the hind leg off a donkey, and his obsession with money - only one of which he got from me.
He is also a dedicated inquisitor, incessantly bombarding us with questions such as "Dad, what goes faster, a big jet or a small jet", "Dad, if you ditch the ants, are there more animals or humans in the world", "Dad, what would you prefer, to be sat on by an elephant, or poked in the eye by a baboon", "Dad, how many people are fishing in the world right now" and "Dad, how much money do you have in the bank".
We used to argue the relevance of the questions or the connection between the alternatives he presented but after four years of barrage we have now just learnt to answer "Animals","Big jets", "Sat on by an elephant" or "64,675,432", which unfortunately is not the amount of money I have in the bank.
So you can imagine the attack when Archie saw his first share price chart.
- "What's a chart",
- "What's a share price",
- "Why does it go up and down",
- "Why don't you know what the price is?",
- "If it was a scooter it would always be $99.95".
- And why indeed don't we know what the share price is?
- That would be nice, if someone could simply tell us.
As rumour would have it, the most popular method of telling you what a share price should be is some form of Buffettology. Its reach is universal. There is hardly a man on the street who would not profess some ability and intention to invest on the sensible and highly publicised principles of value assessment and patience that "the Warren Buffett Way" supports. But allow me to let you in on a sharemarket secret.
- Anybody can buy or sell shares and if that's the case it is not the most accurate method of assessing value that matters but the most popular.
- And the most popular method is - regrettably, or should that be thankfully - dealing in shares without employing any valuation method of all.
Scary, but that's how shares prices move most of the time, without anyone doing any assessment of value.
- How else could the share price of the Commonwealth Bank more than halve from $62 to $24 in the global financial crisis and then more than double to $58 last month if the biggest driver of the share price was the rational assessment of the company's value.
- There is no way the bank's value fell 60 per cent and then rose 140 per cent, and it didn't, but the value of the shares did and this mismatch reveals the plain truth about shares.
There are two very different things going on in the market and every time you put on an order you have to choose to exploit one or the other with nothing in the middle.
- Either you are trading in shares and hoping the price will go up, or
- you are investing in companies and waiting for the value to surface.
Both are OK, both have intellectual pull, neither has the moral high ground (although many think they have) and you can do both at the same time. But as a buyer and seller of shares you do need to ask yourself every time an order goes on the screen "Just what am I doing?" because perhaps one of the most prevalent and enduring mistakes among clients and advisors alike is the use of the language of rational value investment as the pretence for disorderly trade. It is everywhere.
So what are you going to do?
Because I can guarantee that until you stop kidding yourself that
- you are investing in companies
- when you are in fact trading share prices
- either devote yourself to a value approach
- or learn to trade with discipline
- things will not improve and
- you will continue to be sat on by elephants and poked in the eye by baboons.
Marcus Padley is a stockbroker with Patersons Securities and the author of the daily stockmarket newsletter Marcus Today.
http://www.smh.com.au/business/invest-wisely-or-get-flattened-by-elephants-20100205-nilc.html
Also read:
Paying the price of a new Mercedes to buy a new Proton! Beware of manipulators in the market place
Paying the price of a new Mercedes to buy a Proton! Beware of manipulators in the market place
Overpriced: When you are buying a Proton for the price of a new Mercedes.
Undervalued: When you are buying a new Mercedes for the price of a Proton.
Most of the time (80%), the prices of stocks in the stock market are fairly priced.
On some occasions (80%), they are mispriced, either too high or too low relative to their intrinsic value.
If you can distinguish value and price,
Read:
Fountain View's Share Manipulators Caught And Fined!
http://whereiszemoola.blogspot.com/2010/02/fountain-views-share-manipulators.html
Undervalued: When you are buying a new Mercedes for the price of a Proton.
Most of the time (80%), the prices of stocks in the stock market are fairly priced.
On some occasions (80%), they are mispriced, either too high or too low relative to their intrinsic value.
If you can distinguish value and price,
- you can hope to gain a lot in the stock market, usually during the bear period, by buying a new Mercedes for the price of a Proton. ;-)
- you can conversely end up crying with a big hole in your bank account when you pay in the stock market, usually during the bull period, the price of a new Mercedes for a Proton. :-(
Read:
Fountain View's Share Manipulators Caught And Fined!
http://whereiszemoola.blogspot.com/2010/02/fountain-views-share-manipulators.html
Zeti: Interest rates need normalisation
Zeti: Interest rates need normalisation
Written by Siti Sakinah
Friday, 29 January 2010 18:33
KUALA LUMPUR: Some “normalisation” of the interest rates are now in order after they were reduced to “unprecedented” levels following the global financial crisis, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.
She said on Friday, Jan 29 that the interest rates were reduced to the current 2% to avoid a fundamental recession as the global crisis had led to an emergency condition.
“Therefore, (we) need to look forward to some normalisation of interest rates at some point,” she told reporters after a public lecture by the first holder of the International Centre for Education in Islamic Finance (INCEIF) Chair, Dr Abbas Mirakhor.
She said that the normalisation should not be looked at as a tightening, because the policy can still support growth “especially in an environment where inflation is going to remain modest”.
Asked on the danger of keeping the interest rates too low for too long, Zeti said that
“It would result in them (the consumers) taking higher risk without them realising and cause problems later on,” she said, adding that if these problems were to happen, the central bank would have to implement more drastic measures, and to avoid that “we should look at some point to normalized the rates”.
Zeti said that the country was not seeing excessive leverage on home loans nor seeing the formation of an asset bubble as “borrowing by households still remains within prudential levels”. She said that Malaysia offers a wide range of advisory services so consumers had been “prudent in managing their debt and are living within their means”.
On a separate matter, Zeti said Malaysia’s plan to issue foreign banking licences would be revealed in the second half on this year as Bank Negara was currently in the process of evaluating the applications that had been sent before the Dec 31 deadline.
http://www.theedgemalaysia.com/business-news/158786-zeti-interest-rates-need-normalisation.html
Written by Siti Sakinah
Friday, 29 January 2010 18:33
KUALA LUMPUR: Some “normalisation” of the interest rates are now in order after they were reduced to “unprecedented” levels following the global financial crisis, said Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz.
She said on Friday, Jan 29 that the interest rates were reduced to the current 2% to avoid a fundamental recession as the global crisis had led to an emergency condition.
“Therefore, (we) need to look forward to some normalisation of interest rates at some point,” she told reporters after a public lecture by the first holder of the International Centre for Education in Islamic Finance (INCEIF) Chair, Dr Abbas Mirakhor.
She said that the normalisation should not be looked at as a tightening, because the policy can still support growth “especially in an environment where inflation is going to remain modest”.
Asked on the danger of keeping the interest rates too low for too long, Zeti said that
- although there were no signs of asset bubble risk,
- it could lead to other financial imbalance, such as consumer moving their funds outside the country in order to enhance the return on their savings.
“It would result in them (the consumers) taking higher risk without them realising and cause problems later on,” she said, adding that if these problems were to happen, the central bank would have to implement more drastic measures, and to avoid that “we should look at some point to normalized the rates”.
Zeti said that the country was not seeing excessive leverage on home loans nor seeing the formation of an asset bubble as “borrowing by households still remains within prudential levels”. She said that Malaysia offers a wide range of advisory services so consumers had been “prudent in managing their debt and are living within their means”.
On a separate matter, Zeti said Malaysia’s plan to issue foreign banking licences would be revealed in the second half on this year as Bank Negara was currently in the process of evaluating the applications that had been sent before the Dec 31 deadline.
http://www.theedgemalaysia.com/business-news/158786-zeti-interest-rates-need-normalisation.html
Bursa 4Q net profit RM96.3m vs RM13.52m yr ago
Bursa 4Q net profit RM96.3m vs RM13.52m yr ago
Tags: Bursa Malaysia | derivatives | earnings | IPOs
Written by Joseph Chin
Thursday, 04 February 2010 13:19
KUALA LUMPUR: BURSA MALAYSIA BHD [] posted RM96.31 million in net profit for the 4Q ended Dec 31, 2009, up 612% from RM13.52 million a year ago, mainly due to the RM76.0 million gain on disposal of 25% stake in Bursa Malaysia Derivatives.
The stock exchange operator said on Thurdsay, Feb 4 that the group's 4Q09 operational profit (excluding gain on disposal of 25 per cent equity interest in Bursa Malaysia Derivatives) was RM20.3 million, up 50% from 4Q08.
"This was mainly due to the improvement of sentiments in the securities market towards the end of the year," it said. It recommended dividend of nine sen per share for 4Q09 compared with 7.8 sen in 4Q08.
Revenue was RM157.39 million versus RM71.11 million, earnings per share were 18.2 sen versus 2.6 sen.
Equities trading revenue recorded an increase of 30% to RM33.7 million in 4Q09 compared to 4Q08.
Derivatives trading revenue recorded a decline of 20 per cent to RM8.2 million in 4Q09 compared to 4Q08.
Stable revenue increased by 19% to RM28.3 million in 4Q09 compared to 4Q08 primarily due to
For FY09,
http://www.theedgemalaysia.com/business-news/159151-ldhb-now-owns-21-of-megasteel-.html
Tags: Bursa Malaysia | derivatives | earnings | IPOs
Written by Joseph Chin
Thursday, 04 February 2010 13:19
KUALA LUMPUR: BURSA MALAYSIA BHD [] posted RM96.31 million in net profit for the 4Q ended Dec 31, 2009, up 612% from RM13.52 million a year ago, mainly due to the RM76.0 million gain on disposal of 25% stake in Bursa Malaysia Derivatives.
The stock exchange operator said on Thurdsay, Feb 4 that the group's 4Q09 operational profit (excluding gain on disposal of 25 per cent equity interest in Bursa Malaysia Derivatives) was RM20.3 million, up 50% from 4Q08.
"This was mainly due to the improvement of sentiments in the securities market towards the end of the year," it said. It recommended dividend of nine sen per share for 4Q09 compared with 7.8 sen in 4Q08.
Revenue was RM157.39 million versus RM71.11 million, earnings per share were 18.2 sen versus 2.6 sen.
Equities trading revenue recorded an increase of 30% to RM33.7 million in 4Q09 compared to 4Q08.
- Daily average trading value for on-market trades (OMT) and direct business trades (DBT) was higher at RM1.21 billion (4Q08: RM0.91 billion).
Derivatives trading revenue recorded a decline of 20 per cent to RM8.2 million in 4Q09 compared to 4Q08.
- The decrease was primarily due to a drop in total number of contracts traded to 1.36 million contracts in 4Q09 (4Q08: 1.45 million contracts) following the lower interest in FKLI contracts.
Stable revenue increased by 19% to RM28.3 million in 4Q09 compared to 4Q08 primarily due to
- higher public issue fees as a result of an increase in number of allotment for initial public offerings (IPOs),
- higher CDS fees in line with the improvement in the securities market,
- higher additional issue fees as a result of an increase in the number of new call warrants listed and
- higher additional listing fees as a result of an increase in corporate activities mainly from rights issuance.
For FY09,
- net profit was RM177.58 million versus RM104.42 million in FY08.
- Revenue was RM402.42 million compared with RM331.67 million.
http://www.theedgemalaysia.com/business-news/159151-ldhb-now-owns-21-of-megasteel-.html
OSK Research up Hai-O TP to RM10.55
OSK Research up Hai-O TP to RM10.55
Written by OSK Research
Friday, 05 February 2010 08:54
KUALA LUMPUR: OSK Research is maintaining a Buy on Hai-O with a higher target price of RM10.55.
It had recently hosted a corporate presentation by Hai-O which was attended by fund managers who raised questions relating to
"We gather that
OSK Research said as it believed its earnings forecast had been overly conservative previously, it was raising its FY09, FY10 and FY11 earnings by 15%-18%.
http://www.theedgemalaysia.com/business-news/159176-osk-research-up-hai-o-tp-to-rm1055.html
Written by OSK Research
Friday, 05 February 2010 08:54
KUALA LUMPUR: OSK Research is maintaining a Buy on Hai-O with a higher target price of RM10.55.
It had recently hosted a corporate presentation by Hai-O which was attended by fund managers who raised questions relating to
- the company’s MLM’s expansion to Indonesia, and
- its new TECHNOLOGY [] venture.
"We gather that
- Hai-O’s MLM operations here and in Indonesia are proceeding smoothly, and
- that there are good prospects for its technology division.
- We also see ongoing expansion for the group’s retail business,"
OSK Research said as it believed its earnings forecast had been overly conservative previously, it was raising its FY09, FY10 and FY11 earnings by 15%-18%.
http://www.theedgemalaysia.com/business-news/159176-osk-research-up-hai-o-tp-to-rm1055.html
Crowded skies squeeze Asia's budget carriers
Crowded skies squeeze Asia's budget carriers
Written by Reuters
Friday, 05 February 2010 21:01
SINGAPORE: Asian airlines, particularly budget carriers, may be taking off on a high-risk strategy -- ordering hundreds of aircraft to offer new routes and more flights, just as growth in low-cost travel is seen slowing, according to Reuters.
Over the next five years, budget carriers from Malaysia's AirAsia to Singapore's Tiger Airways will take delivery of over 500 planes, meaning a capacity increase of 15 percent a year -- double what some observers are forecasting.
The real prospect that some budget carriers, and the full-service airlines they compete with, may not survive the dogfight could, in turn, mean billions of dollars of cancelled orders for Boeing and Airbus.
Asia has become the largest market for the two big planemakers, accounting for a third of outstanding orders.
"Not all airlines will survive," said Terence Fan, assistant professor at Singapore Management University. "Mid-double-digit growth is a lot to achieve, and the aviation industry has had a lot of ups and downs."
"We're already seeing Thai Airways, for example, reduce its short-haul flights from Bangkok because of competition from low-cost carriers," Fan added.
Fan, who last year published a paper on Europe's passenger airline industry, noted around 130 airline start-ups there in the 10 years to 2006. Only about 50 survived, and that number has since fallen further.
While Ryanair and Easyjet have thrived and become major players in Europe, others such as SkyEurope, described by consultancy Skytrax as the best low-cost carrier in Eastern Europe, have gone bankrupt, Fan said.
Asian low-cost carriers have grown rapidly over the past decade and now account for 14 percent of intra-Asia travel, according to Airbus estimates.
Indonesia's Lion Air, for example, has outstanding orders and options for over 100 Boeing 737-900s, each with a list price of around $80 million. AirAsia will boost its Airbus A320 fleet to 175 planes by end-2015 from 70 now.
SLOWING GROWTH
But, while budget carriers achieved compounded growth of 38 percent between 2001-09, the overall intra-Asia market expanded at just 6 percent, Airbus figures showed.
Boeing said this week it expects new orders for commercial aircraft to fall short of deliveries, with no increase in demand until 2012.
Boeing had gross orders from airlines for 263 planes last year, but net orders of 142 planes after cancellations. Airbus had gross orders of 310 planes and net orders of 271.
Alex Glock, Asia Pacific managing director for Brazilian planemaker Embraer, said the golden years for low-cost carriers ended with the global financial crisis, when many suffered falling demand, much like the full-service airlines.
In the last two years, the number of low-cost carriers in Asia Pacific fell to 17 from 20, and the number of flights dropped to 11,956 from 12,034.
Glock sees regional demand growing at an average annual rate of 7 percent, following a spike in the next two years as traffic returns to pre-recession levels.
"Even though low-cost carriers grew more than the regional average, the growth spurt has passed," he said.
Many of Asia's budget airlines are also losing money.
In India, a host of low-cost and conventional airlines have emerged to challenge state-owned Air India and Indian Airlines and, in Macau, Viva is seeking financial assistance from the government to stay afloat.
Even so, analysts expect low-cost carriers to do better than the overall industry by opening new routes and picking up market share from second-tier flag carriers such as Indonesia's Garuda.
"This sector will continue to gain market share particularly in Asia's emerging economies. The region is dynamic, has huge populations with vast physical distances and enjoys rising incomes," said Tan Teng Boo, CEO of Malaysian-based Capital Dynamics, which manages $300 million.
But Tan said he does not own airline shares.
"The airline business, though glamorous, is very tough. The industry has loads of players and airlines don't have pricing power. It's essentially a commodity business with very high capital requirements and low margins." - Reuters
http://www.theedgemalaysia.com/business-news/159247-crowded-skies-squeeze-asias-budget-carriers.html
Written by Reuters
Friday, 05 February 2010 21:01
SINGAPORE: Asian airlines, particularly budget carriers, may be taking off on a high-risk strategy -- ordering hundreds of aircraft to offer new routes and more flights, just as growth in low-cost travel is seen slowing, according to Reuters.
Over the next five years, budget carriers from Malaysia's AirAsia to Singapore's Tiger Airways will take delivery of over 500 planes, meaning a capacity increase of 15 percent a year -- double what some observers are forecasting.
The real prospect that some budget carriers, and the full-service airlines they compete with, may not survive the dogfight could, in turn, mean billions of dollars of cancelled orders for Boeing and Airbus.
Asia has become the largest market for the two big planemakers, accounting for a third of outstanding orders.
"Not all airlines will survive," said Terence Fan, assistant professor at Singapore Management University. "Mid-double-digit growth is a lot to achieve, and the aviation industry has had a lot of ups and downs."
"We're already seeing Thai Airways, for example, reduce its short-haul flights from Bangkok because of competition from low-cost carriers," Fan added.
Fan, who last year published a paper on Europe's passenger airline industry, noted around 130 airline start-ups there in the 10 years to 2006. Only about 50 survived, and that number has since fallen further.
While Ryanair and Easyjet have thrived and become major players in Europe, others such as SkyEurope, described by consultancy Skytrax as the best low-cost carrier in Eastern Europe, have gone bankrupt, Fan said.
Asian low-cost carriers have grown rapidly over the past decade and now account for 14 percent of intra-Asia travel, according to Airbus estimates.
Indonesia's Lion Air, for example, has outstanding orders and options for over 100 Boeing 737-900s, each with a list price of around $80 million. AirAsia will boost its Airbus A320 fleet to 175 planes by end-2015 from 70 now.
SLOWING GROWTH
But, while budget carriers achieved compounded growth of 38 percent between 2001-09, the overall intra-Asia market expanded at just 6 percent, Airbus figures showed.
Boeing said this week it expects new orders for commercial aircraft to fall short of deliveries, with no increase in demand until 2012.
Boeing had gross orders from airlines for 263 planes last year, but net orders of 142 planes after cancellations. Airbus had gross orders of 310 planes and net orders of 271.
Alex Glock, Asia Pacific managing director for Brazilian planemaker Embraer, said the golden years for low-cost carriers ended with the global financial crisis, when many suffered falling demand, much like the full-service airlines.
In the last two years, the number of low-cost carriers in Asia Pacific fell to 17 from 20, and the number of flights dropped to 11,956 from 12,034.
Glock sees regional demand growing at an average annual rate of 7 percent, following a spike in the next two years as traffic returns to pre-recession levels.
"Even though low-cost carriers grew more than the regional average, the growth spurt has passed," he said.
Many of Asia's budget airlines are also losing money.
In India, a host of low-cost and conventional airlines have emerged to challenge state-owned Air India and Indian Airlines and, in Macau, Viva is seeking financial assistance from the government to stay afloat.
Even so, analysts expect low-cost carriers to do better than the overall industry by opening new routes and picking up market share from second-tier flag carriers such as Indonesia's Garuda.
"This sector will continue to gain market share particularly in Asia's emerging economies. The region is dynamic, has huge populations with vast physical distances and enjoys rising incomes," said Tan Teng Boo, CEO of Malaysian-based Capital Dynamics, which manages $300 million.
But Tan said he does not own airline shares.
"The airline business, though glamorous, is very tough. The industry has loads of players and airlines don't have pricing power. It's essentially a commodity business with very high capital requirements and low margins." - Reuters
http://www.theedgemalaysia.com/business-news/159247-crowded-skies-squeeze-asias-budget-carriers.html
Latexx Partners 4Q net profit up 157% to RM17m
Latexx Partners 4Q net profit up 157% to RM17m
Written by Joseph Chin
Friday, 05 February 2010 17:47
KUALA LUMPUR: LATEXX PARTNERS BHD []'s net profit in the fourth quarter ended Dec 31, 2009 jumped 157% to RM17.27 million from RM6.72 million a year ago, underpinned by
The glove maker said on Friday, Feb 5
For FY09,
On the outlook, Latexx was upbeat about repeating the FY09 growth in tandem with the growth of world demand for medical gloves in the health sector.
"The strategy of increasing capacity and switching to a better mix of products coupled with more aggressive marketing efforts into new markets will contribute to a sustained flow of profitability," it said.
On Jan 8, Latexx teamed up with Dutch company Budev BV to manufacture and distribute natural rubber gloves that would have non-detectable level of proteins and allergens.
This tie-up with Budev would enable the group to produce a new and potentially higher margin product.
"The JV is expected to benefit the group with a major technological boost and a competitive advantage in the global market. In addition, the group has also targeted to increase nitrile output to more than 30% in the 1st quarter FY2010 due to strong demand," it said.
http://www.theedgemalaysia.com/business-news/159228-latexx-partners-4q-net-profit-up-157-to-rm17m.html
Note: Latexx's three-year EPS CAGR of 104.4% is the highest in the industry (CIMB Research Feb 2)
Written by Joseph Chin
Friday, 05 February 2010 17:47
KUALA LUMPUR: LATEXX PARTNERS BHD []'s net profit in the fourth quarter ended Dec 31, 2009 jumped 157% to RM17.27 million from RM6.72 million a year ago, underpinned by
- recent capacity expansion,
- aggressive marketing strategy and
- overall cost savings.
The glove maker said on Friday, Feb 5
- group revenue increased 47.1% to RM102.84 million from RM69.86 million while
- pre-tax profit increased 158.8% to RM17.39 million from RM6.72 million.
- Earnings per share were 8.86 sen versus 3.45 sen.
- It proposed a dividend of one sen per share.
For FY09,
- group revenue rose by 47.1% to RM328.43 million from RM223.25 million in FY08 while
- net profit jumped 243% to RM52.1 million from RM15.19 million.
- Profit before tax increased 243.6% to RM52.22 million from RM15.20million.
On the outlook, Latexx was upbeat about repeating the FY09 growth in tandem with the growth of world demand for medical gloves in the health sector.
"The strategy of increasing capacity and switching to a better mix of products coupled with more aggressive marketing efforts into new markets will contribute to a sustained flow of profitability," it said.
- Latexx said the installation of eight double formers production lines was completed in December 2009 and is in full operation.
- In addition, the CONSTRUCTION [] of an additional production plant adjacent to existing production facilities is in progress.
- It is expected to start operation in early 2010 and total capacity will increase to 9 billion pieces per annum by 2011.
On Jan 8, Latexx teamed up with Dutch company Budev BV to manufacture and distribute natural rubber gloves that would have non-detectable level of proteins and allergens.
This tie-up with Budev would enable the group to produce a new and potentially higher margin product.
"The JV is expected to benefit the group with a major technological boost and a competitive advantage in the global market. In addition, the group has also targeted to increase nitrile output to more than 30% in the 1st quarter FY2010 due to strong demand," it said.
http://www.theedgemalaysia.com/business-news/159228-latexx-partners-4q-net-profit-up-157-to-rm17m.html
Note: Latexx's three-year EPS CAGR of 104.4% is the highest in the industry (CIMB Research Feb 2)
Factors influencing decision making process-Stock Market
Factors influencing decision making process-Stock Market
Nits | Feb 05, 2010 | 0 comments
Factors influencing Decisions:
A Quest for the proper course of Decision-making in Share-investments
It has been seen for a long time that human being is not always rational and his decisions are not always objective. For instance, if one watches share market, technically the price of a stock should be reflection of its P/E, P/CF & P/BV values, but such is not the case most of times, because the prices of indices are also governed by various aspect and factors of human mindset- expectations, sentiments and excitement to name a few.
This unpredictability of human behavior has led to emergence of a new field in psychology termed as ‘Behavioral Finance’. Behavioral Finance is the study of roles of behavioral factors in the field of finance, especially investment
It is well-known fact that intelligence is one of the important factors, besides hard work and perseverance for achieving success in life. It is generally expected from an intelligent individual to perceive and understand situation properly, think rationally and reason out everything, before making any decision. Clarity of goal, a well-thought strategy to achieve the same, moderate level of motivation, a disciplined behavior with flexibility to reassess the strategies with new developments is certain other requirements to achieve success. This is applied everywhere, in all decisions and goals including individual’s investment decisions as well.
But since human beings do not live in isolation, therefore there are other factors as well which influence his interpersonal relations, and consequently his decisions. Rationality in a man’s decisions or behavior is not always seen as to be expected from them. For instance, people do make different decisions in the two similar situations or behave similarly in two different situations depending upon their emotive state of mind. Thus, emotion plays a vital role in influencing his behavior and decisions. This becomes more apparent in case of investment-related decisions when taken in relation to the share market.
But debate does not end just here. Human beings are not just born for investment; they have other things to do as well. There are numerous occasions when people make mistakes in investment-decisions mostly under the influence of emotions and stress. It is not possible for a person to be totally immune to his emotions, but once he is aware of the risks involved with emotional instability, one can limit the losses. In this context, fear and greed are the most well-known emotions. There is tendency in human-beings to make more money in short time and this tends him to invest in share-market, even when it is at boom. So when market is bearish, the emotion of fear replaces greed. Human-beings love profit, but hate loss even more. A slightly negative indication brings in a lot of negative emotions and consequently, fear comes in. Initially, investor holds position (while rationally, if he wants to quit, he should book losses at that time only) and once the market’s bottoming out tendency to quit gets bigger (though if investor has been rational, he should have waited for a little longer duration and should have stuck to his position). In this way, it would not be wrong to say that not only fear and greed have negative effect on rational thinking, but they also have adverse effects on the long-term strategies of individual. These two unfortunate passions bring in impulsiveness in the individual’s character and continue to press him to take irrational decisions.
Further, Defense-mechanism of denial used by a person to save his self esteem and his ego are also significant factors which prove dangerous in the long run. An investor is, most of the times, adamant to accept that he has made wrong decision. So, he sticks to his decision and end up holding his loosing position longer than what should have been. The anticipation of ‘being wrong’ by any investor, cuts his losses and enables him to take decisions which help him to recover the loss.
Another aspect of Defense-mechanism of denial is its effect on analytical reasoning. Under emotional state of denial, an individual perceives selectively. He tends to emphasize data and information which confirm his position and viewpoint. It also restricts the individual to rationally analyze any new adverse information. Sometimes, it also generates tendency to overemphasize any subtle good indicator and underemphasize the bad indicators, and so, compel the investor to continue with the loosing position, thus aggravating loses.
These factors always influence the decisions of an individual, but the degree of their influence differs. Now, it depends on the individual how he (or she) manipulates these factors for profit. A good investor is one who not only comes out of loss by applying logical thinking but also makes it profitable one. Moreover, one should not stick to his decisions , if situations have changed. The people with low self-esteem and low EQ stick with their decision and apply defense mechanism. False impression of hope leads them to further losses. They even set aside the direction of necessary indicators.
’Never Say Die’
Read more:
http://ansblog.com/2010/02/factors-influencing-decision-making-process/#ixzz0ehyAKUQA
http://ansblog.com/2010/02/factors-influencing-decision-making-process/
Nits | Feb 05, 2010 | 0 comments
Factors influencing Decisions:
A Quest for the proper course of Decision-making in Share-investments
It has been seen for a long time that human being is not always rational and his decisions are not always objective. For instance, if one watches share market, technically the price of a stock should be reflection of its P/E, P/CF & P/BV values, but such is not the case most of times, because the prices of indices are also governed by various aspect and factors of human mindset- expectations, sentiments and excitement to name a few.
This unpredictability of human behavior has led to emergence of a new field in psychology termed as ‘Behavioral Finance’. Behavioral Finance is the study of roles of behavioral factors in the field of finance, especially investment
It is well-known fact that intelligence is one of the important factors, besides hard work and perseverance for achieving success in life. It is generally expected from an intelligent individual to perceive and understand situation properly, think rationally and reason out everything, before making any decision. Clarity of goal, a well-thought strategy to achieve the same, moderate level of motivation, a disciplined behavior with flexibility to reassess the strategies with new developments is certain other requirements to achieve success. This is applied everywhere, in all decisions and goals including individual’s investment decisions as well.
But since human beings do not live in isolation, therefore there are other factors as well which influence his interpersonal relations, and consequently his decisions. Rationality in a man’s decisions or behavior is not always seen as to be expected from them. For instance, people do make different decisions in the two similar situations or behave similarly in two different situations depending upon their emotive state of mind. Thus, emotion plays a vital role in influencing his behavior and decisions. This becomes more apparent in case of investment-related decisions when taken in relation to the share market.
But debate does not end just here. Human beings are not just born for investment; they have other things to do as well. There are numerous occasions when people make mistakes in investment-decisions mostly under the influence of emotions and stress. It is not possible for a person to be totally immune to his emotions, but once he is aware of the risks involved with emotional instability, one can limit the losses. In this context, fear and greed are the most well-known emotions. There is tendency in human-beings to make more money in short time and this tends him to invest in share-market, even when it is at boom. So when market is bearish, the emotion of fear replaces greed. Human-beings love profit, but hate loss even more. A slightly negative indication brings in a lot of negative emotions and consequently, fear comes in. Initially, investor holds position (while rationally, if he wants to quit, he should book losses at that time only) and once the market’s bottoming out tendency to quit gets bigger (though if investor has been rational, he should have waited for a little longer duration and should have stuck to his position). In this way, it would not be wrong to say that not only fear and greed have negative effect on rational thinking, but they also have adverse effects on the long-term strategies of individual. These two unfortunate passions bring in impulsiveness in the individual’s character and continue to press him to take irrational decisions.
Further, Defense-mechanism of denial used by a person to save his self esteem and his ego are also significant factors which prove dangerous in the long run. An investor is, most of the times, adamant to accept that he has made wrong decision. So, he sticks to his decision and end up holding his loosing position longer than what should have been. The anticipation of ‘being wrong’ by any investor, cuts his losses and enables him to take decisions which help him to recover the loss.
Another aspect of Defense-mechanism of denial is its effect on analytical reasoning. Under emotional state of denial, an individual perceives selectively. He tends to emphasize data and information which confirm his position and viewpoint. It also restricts the individual to rationally analyze any new adverse information. Sometimes, it also generates tendency to overemphasize any subtle good indicator and underemphasize the bad indicators, and so, compel the investor to continue with the loosing position, thus aggravating loses.
These factors always influence the decisions of an individual, but the degree of their influence differs. Now, it depends on the individual how he (or she) manipulates these factors for profit. A good investor is one who not only comes out of loss by applying logical thinking but also makes it profitable one. Moreover, one should not stick to his decisions , if situations have changed. The people with low self-esteem and low EQ stick with their decision and apply defense mechanism. False impression of hope leads them to further losses. They even set aside the direction of necessary indicators.
So, to be a good investor, the proper way to act is not simply to book profit at appropriate time, but also to minimize losses in the adverse situations.
’Never Say Die’
Read more:
http://ansblog.com/2010/02/factors-influencing-decision-making-process/#ixzz0ehyAKUQA
http://ansblog.com/2010/02/factors-influencing-decision-making-process/
Fund charges exposed as fees outstrip returns
Fund charges exposed as fees outstrip returns
Published: 6:51AM GMT 02 Feb 2010
Millions of investors have their pensions and long-term savings in funds where the managers have taken more in fees than they have delivered in returns over the past decade.
Many of these funds are run by some of our best-known banks and insurers. Matthew Morris, a former financial adviser who conducted this research, said: "Special mention should be made of Scottish Equitable, NatWest, Scottish Widows, Scottish Life and Phoenix, all of whom have too many funds that meet these depressing standards."
NatWest (part of the RBS group) and Scottish Widows (now owned by Lloyds Banking Group) are now both partly owned by the Government.
The Daily Telegraph contacted all the above providers and only Scottish Equitable and Phoenix replied.
A spokeswoman for Scottish Equitable said: "We take fund performance very seriously. We've made changes to personnel and investment strategy to address areas of underperformance. Figures are improving, but in some cases not as quickly as we'd like."
A spokesman for Phoenix said: "Many of these policies have guarantees, the value of which exceeds the asset share. And in this case the investment return earned, whether good or bad, may not impact the payment a policyholder receives."
Mr Morris conducted the research for the financial website he runs – www.howmuchdoineedtoretire.co.uk – which offers consumers information about their retirement options.
He says: "There is a staggering amount of money invested in these underperforming funds, where the manager hasn't even been able to deliver sufficient returns to cover his own fee.
A total of 260 funds met these criteria. To put this in context, over the same 10-year period
But Mr Morris has also identified 45 funds within this group that "stood out from the crowd" because of their disappointing performance and their size – a number of which are listed in the table above.
These funds, he says, have failed their investors "on every count we can measure".
There is, of course, a cost to investing, be it
It has been a tough decade for investors, with two sustained periods of falling share prices. During periods of volatility and lower investment returns, it pays to keep an eye on costs, which can obliterate slim returns.
There are a number of steps investors can take to reduce the cost of investing. Those buying an investment fund, such as a unit trust or Isa, should look to use a discount broker, where any commission charges are usually refunded in full.
Annual management fees are often far lower on "passive" investments such as tracker funds, or exchange traded funds (ETFs), where the return is linked to the performance of a given stock market index (for example, the FTSE100) rather than paying a fund manager to manage a portfolio of selected stocks.
Many tracker funds now charge less than 1 per cent a year, and some ETF have expense ratios as low as 0.35 per cent. However, it is still normal for actively managed funds to charge 1.5 per cent a year.
Mr Morris adds: "There are occasions where a fund manager can justify taking a higher fee than they return. In the short term, this may frequently happen as investment values go down, but regular fees will still be deducted."
In some cases, this can happen over longer periods, too. Anyone who invested in a Japanese fund in the Nineties could not have avoided the extreme fall in share prices seen over this decade. But over 10-year periods such examples are few and far between.
As well as keeping an eye on costs, investors should regularly review the performance of all their savings and investments. This does not only mean looking at whether you have made money or not, but also checking how the fund managers rate in relation to their peers.
All funds should state what sector they are in and how they "benchmark" returns. So a fund invested in the US market might be benchmarked against the Dow Jones index, and should be compared against US fund managers.
If this market goes into decline, you would expect the fund to lose money, but the pertinent question to ask is whether your manager has lost less than others in this sector. If a manager seriously underperforms for an extended period – say three years – investors should consider moving their money elsewhere.
Those funds listed above have all underperformed over extended periods. The Scottish Equitable European Pension fund has lost almost 1 per cent in value over 10 years, compared to an average growth of 2.7 per cent in this sector.
It also has the unenviable record of being ranked bottom out of the 73 funds in its sectors over five years; and coming 43rd out of 43 funds over the decade.
Mr Morris says he would like the fund managers either to improve returns, reduce charges or start offering refunds. This seems unlikely, though, in the current climate.
But while billions remain languishing in these funds, it is not hard to see why managers continue to take their large fees. Investors need to start switching from fund managers who don't offer a commensurate return on their investment.
If enough people took action, these managers may not collect such generous bonuses, and you may start to see a decent return on your money.
A full list of funds that have underperformed can be found at www.howmuchdoineedtoretire.co.uk/thefundslist.html
http://www.telegraph.co.uk/finance/personalfinance/7134695/Fund-charges-exposed-as-fees-outstrip-returns.html
More than £100 billion is invested in funds where the fees charged have outstripped investment returns over the past 10 years.
Published: 6:51AM GMT 02 Feb 2010
Millions of investors have their pensions and long-term savings in funds where the managers have taken more in fees than they have delivered in returns over the past decade.
New research – seen exclusively by The Daily Telegraph – has looked at the performance of the biggest pensions, insurance and investments funds in Britain – and it makes sobering reading.
More than £100 billion is invested in funds where the fees charged have outstripped investment returns over the past 10 years. In total, the managers of these funds have received almost £10 billion in fees.
Many of these funds are run by some of our best-known banks and insurers. Matthew Morris, a former financial adviser who conducted this research, said: "Special mention should be made of Scottish Equitable, NatWest, Scottish Widows, Scottish Life and Phoenix, all of whom have too many funds that meet these depressing standards."
NatWest (part of the RBS group) and Scottish Widows (now owned by Lloyds Banking Group) are now both partly owned by the Government.
The Daily Telegraph contacted all the above providers and only Scottish Equitable and Phoenix replied.
A spokeswoman for Scottish Equitable said: "We take fund performance very seriously. We've made changes to personnel and investment strategy to address areas of underperformance. Figures are improving, but in some cases not as quickly as we'd like."
A spokesman for Phoenix said: "Many of these policies have guarantees, the value of which exceeds the asset share. And in this case the investment return earned, whether good or bad, may not impact the payment a policyholder receives."
Mr Morris conducted the research for the financial website he runs – www.howmuchdoineedtoretire.co.uk – which offers consumers information about their retirement options.
He says: "There is a staggering amount of money invested in these underperforming funds, where the manager hasn't even been able to deliver sufficient returns to cover his own fee.
"We decided to create a list of those funds, which have a significant size (more than £100 million) and the returns averaged at less than 1 per cent a year."
A total of 260 funds met these criteria. To put this in context, over the same 10-year period
- the FTSE100 returned 9.8 per cent (including dividend payments),
- the FTSE All-Share was up by 18.6 per cent and
- the average investment fund delivered a return 41.5 per cent.
But Mr Morris has also identified 45 funds within this group that "stood out from the crowd" because of their disappointing performance and their size – a number of which are listed in the table above.
These funds, he says, have failed their investors "on every count we can measure".
There is, of course, a cost to investing, be it
- an upfront fee charged on a pension or unit trust,
- annual management charges deducted, or
- the charges levied when a manager buys and sells investments within a fund.
- There are also tax charges to be taken into consideration, some of which are automatically deducted within a fund, others that are only paid when you cash in an investment.
There are a number of steps investors can take to reduce the cost of investing. Those buying an investment fund, such as a unit trust or Isa, should look to use a discount broker, where any commission charges are usually refunded in full.
Many fund managers will automatically deduct up to 5 per cent upfront as an "initial charge", which can take more than a year to recover in poor markets.
Annual management fees are often far lower on "passive" investments such as tracker funds, or exchange traded funds (ETFs), where the return is linked to the performance of a given stock market index (for example, the FTSE100) rather than paying a fund manager to manage a portfolio of selected stocks.
Many tracker funds now charge less than 1 per cent a year, and some ETF have expense ratios as low as 0.35 per cent. However, it is still normal for actively managed funds to charge 1.5 per cent a year.
Mr Morris adds: "There are occasions where a fund manager can justify taking a higher fee than they return. In the short term, this may frequently happen as investment values go down, but regular fees will still be deducted."
In some cases, this can happen over longer periods, too. Anyone who invested in a Japanese fund in the Nineties could not have avoided the extreme fall in share prices seen over this decade. But over 10-year periods such examples are few and far between.
For every fund where there is a genuine reason for a period of sustained underperformance, there will be many more where there is no justification for such poor returns.
As well as keeping an eye on costs, investors should regularly review the performance of all their savings and investments. This does not only mean looking at whether you have made money or not, but also checking how the fund managers rate in relation to their peers.
If this market goes into decline, you would expect the fund to lose money, but the pertinent question to ask is whether your manager has lost less than others in this sector. If a manager seriously underperforms for an extended period – say three years – investors should consider moving their money elsewhere.
Those funds listed above have all underperformed over extended periods. The Scottish Equitable European Pension fund has lost almost 1 per cent in value over 10 years, compared to an average growth of 2.7 per cent in this sector.
It also has the unenviable record of being ranked bottom out of the 73 funds in its sectors over five years; and coming 43rd out of 43 funds over the decade.
Mr Morris says he would like the fund managers either to improve returns, reduce charges or start offering refunds. This seems unlikely, though, in the current climate.
But while billions remain languishing in these funds, it is not hard to see why managers continue to take their large fees. Investors need to start switching from fund managers who don't offer a commensurate return on their investment.
If enough people took action, these managers may not collect such generous bonuses, and you may start to see a decent return on your money.
A full list of funds that have underperformed can be found at www.howmuchdoineedtoretire.co.uk/thefundslist.html
http://www.telegraph.co.uk/finance/personalfinance/7134695/Fund-charges-exposed-as-fees-outstrip-returns.html
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